Managed investment fund (trust) distributions

If you're a unit holder in a managed investment fund (in legal terms a trust) and have received a distribution that includes a net capital gain, you need to take your share of the net capital gain into account in working out your own net capital gain for the year – to the extent that your share doesn't exceed the overall net amount of your distribution from the trust. The examples below show how this works.

Your statement of distribution or advice should show your share of the trust net capital gain. If the only capital gains you've made are from your unit trust investments, your net capital gain is the amount you received from those investments.

If your statement shows that your share of the trust’s net capital gain is more than the overall net amount of your distribution, there is a limit on the amount of the capital gain component you exclude from L item 13 Partnerships and trusts on your tax return (supplementary section). In this situation, you can't exclude an amount greater than the overall net amount of your distribution from the trust (see examples below). The amount of your share of the trust’s net capital gain you exclude from the amount at L item 13 Partnerships and trusts is used in working out your capital gain. If you receive a distribution from more than one trust, this applies to each distribution.

Trust distributions where the CGT discount or the small business 50% active asset reduction applies

Your managed fund statement should also show whether any discounts or reductions were applied by the trustee in determining the amount of the capital gain. You’ll need to know this in order to work out the correct amount to include in your own net capital gain calculation.

How you do this depends on whether you have any other capital gains or capital losses, or carried forward capital losses. If you'll be deducting a capital loss (or previous year capital loss) from your managed fund capital gains, you'll need to gross up your share of any discounted capital gains from your managed fund first. If you don't have capital losses, you don't need to calculate the grossed up capital gain.

Some managed funds show the grossed up amount of the discounted capital gain on your statement. If this is the case, you use that grossed up amount when you work out your net capital gain.

If the managed fund has not shown the grossed up amount of your discounted capital gain, you need gross it up as follows, before deducting any losses:

Gain reduced by:

To gross up your share of gain:

CGT discount

Multiply by 2

Small business 50% active asset reduction

Multiply by 2

Both the CGT discount and the small business 50% active asset reduction

Multiply by 4

You include these grossed-up amounts in your own net capital gain calculation, along with any other capital gains or losses you've made as a result of other CGT events not related to your interest in the trust.

Example: Capital gain greater than share of trust net income and capital gain was discounted

Daniel’s statement of distribution from a managed fund (a trust) shows that his share of the net income of the trust for tax purposes was $7,000.

This is made up of his $3,000 proportionate share of the trust’s non-primary production loss and his $10,000 proportionate share of the trust’s net capital gain to which the trust applied the 50% CGT discount. Daniel also made a $2,000 capital loss during the year on the sale of some shares. He doesn't have any other trust distributions for the year.

Daniel will need to write a zero at item 13 Partnerships and Trusts on his tax return. He takes $14,000 (that is, the $7,000 remaining of his share of the capital gain from the trust grossed up) into account in working out his net capital gain at item 18 Capital gains. Therefore, after deducting the capital losses from the grossed up capital gain he is taken to have made ($14,000 − $2,000 = $12,000), he applies the 50% CGT discount ($12,000 × 50% = $6,000) and writes $6,000 at A item 18Capital gains on his tax return (supplementary section). He also writes $14,000 ($7,000 grossed up) at H item 18.

Debra’s statement of distribution or advice from a managed fund (a trust) shows her share of the net income of the trust for tax purposes was $2,000.

This is made up of Debra's $5,000 proportionate share of the trust’s primary production loss, her $2,000 proportionate share of the trust’s non-primary production income and her $5,000 proportionate share of the trust’s net capital gain. (The trust’s net capital gain doesn't include any discounted gains.)

At item 13 Partnerships and Trusts on her tax return (supplementary section), Debra will include the $5,000 loss from primary production at L and the $5,000 non-primary production income at U (that is, $2,000 non-primary production income plus sufficient net capital gain [$3,000] to offset the loss from primary production).

Assuming Debra has no other capital gains or losses, she will write $2,000 ($5,000 − $3,000) at H and A item 18 Capital gains on her tax return (supplementary section).

End of example

If you've received a distribution from a managed investment trust that includes a net capital gain, you need to take your share of the net capital gain into account in working out your own net capital gain.

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